FCA calls for pension cost transparency from asset managers

Asset managers could be required to disclose aggregate transaction costs to pension schemes that invest in their funds under new rules proposed by the FCA today.

Currently, independent governance committees and trustees must report on transaction costs but asset managers do not have to provide full disclosure of these costs in a standardised form.

To make sure IGCs and trustees get information about transaction costs, the FCA is proposing to “place a duty on asset managers to disclose aggregate transaction costs to pension schemes that, directly or indirectly, invest in their funds”.

In a consultation paper, the FCA proposes that asset managers provide a breakdown of transaction costs, including specific costs such as taxes and securities lending costs, when asked.

The regulator says the changes would “deliver a high degree of consistency in how transaction costs are reported and give governance bodies confidence that the information presented to them contains a comprehensive assessment of costs”.

FCA strategy and competition executive director Christopher Woolard says: “The proposals we are announcing today will allow IGCs to see fully the transaction costs that their funds pay and enable them to make better decisions about how they get value for money for their members.”

The FCA is also proposing using the “slippage cost” method for evaluating transaction costs, which compares the price a transaction was actually executed at with the price when the order to transact entered the market.

Responding to the consultation, Investment Association director of public policy Jonathan Lipkin says: “The asset management industry is committed to introducing full charges and costs disclosure across all investment products and services.

“The work to make that happen is well under way, and has already resulted in a new template for Local Government Pension Scheme reporting.”